LEGAL ACCOUNTANCY- TUTORIAL 6 (Jan 2022) 1. From the following trial balance of Tom Brown, store owner, prepare an income statement for the year ending 31 December 2013, and a statement of financial position as at that date. Trial Balance as at 31 December 3013 Dr Cr Ghs Ghs Sales 400,000 Purchases 350,000 Sales Returns 5,000 Purchases returns 6,200 Opening inventory-1 Jan 2013 100,000 Provision for doubtful debts 800 Wages & Salaries 30,000 Rates 6,000 Telephone 1,000 Shop fittings at cost 40,000 Van at cost 30,000 Accounts receivable & payable 9,800 7,000 Bad Debts 200 Capital 179,000 Bank Balance 3,000 Drawings 18,000 593,000 593,000
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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